How to turn Caribbean Posts into engines of economic development

Postal banks are a proven force in increasing financial inclusion. According to the Universal Postal Union, over 1.5 billion people worldwide (20%), including the poor, less educated and unemployed have postal bank accounts. Twice as many female clients use post offices rather than banks. People are using the sustainable financial services provided by Posts such as savings, payments, money transfers, insurance and credit.

It’s now time to turn Posts into engines of economic development.

This article was first published as a LinkedIn article in October 2017. It was reposted in the following Groups: Postal Innovation as well as The Harvard Business Review and The Economist Newspaper readers. Although it addresses Caribbean Posts, the message and strategy effort in support of their country’s economic development is applicable to all Posts in emerging markets.

How to turn Caribbean Post Offices into engines of economic development

Inexpensive smartphones, lower-cost Internet and the use of mobile money have been transformative in developed and emerging markets alike. They have provided unparalleled opportunities to access markets, information, financial services and viable business opportunities. This has led to a dramatic increase in Micro, Small and Medium Enterprises (MSMEs). MSME exports are a veritable engine for job creation, increased wages and economic growth. Caribbean Post Offices can play a key role in promoting MSME maturity and exports.

Promoting e-commerce imports is not enough

In Kenya, MPesa (mobile phone-based money storage, deposit, transfer and microfinance) is used by 96% of households. Eighty-three percent (83%) of Kenyans use mobile phones and 28% have access to the Internet. People are now using WhatsApp and cheaper Internet instead of SMS and they are accessing their e-commerce through their smartphones. The once ailing Postal Corporation of Kenya (Posta) saw incoming parcels grow by almost 60% this year.

Last February 2017, the Guyana Post Office Corporation (GPOC), in collaboration with Miami-based Freight Forwarding Company PAKYA, launched its e-commerce service Online Mailbox and Delivery, under the trademark Swift Shipping, with its slogan being Bringing it Home. In Guyana 73% of people use mobile phones and 36% have access to the Internet. Post Aruba offers a similar e-commerce service.

During the 49th World Post Week celebration held last week across globe, numerous Postmaster Generals promised e-commerce and to diversify into new services. However, facilitating only e-commerce imports, despite the service to customers and the gains in incoming parcels for the Posts, simply channels more money into the country’s import bill.

Jamaica’s main exports are alumina, bauxite, sugar, rum, coffee, yams, beverages, chemicals and mineral fuels. Its main export partners are USA, Canada, the United Kingdom and the Netherlands. However, many MSMEs are largely excluded from markets abroad.

At the Montego Bay Caribbean MSME Conference in June 2017, Jamaica’s Tourism Minister, Edmund Bartlett, said that his ministry was focused on empowering MSMEs to produce authentic, locally made products for visitors in order to reduce imports. Professor Paul Golding, Dean at the College of Business and Management University of Technology in Jamaica, proposed “Economic Nationalism”. He urged that Caribbean countries make improving public procurement practices and the removal of obstacles to MSMEs a key priority so that MSME’s can maximize potential for job creation, growth and innovation.

To grow the Caribbean economies we need to develop MSME skills in business and production, encourage Buy Caribbean so dollars stay at home but most importantly facilitate exporting to bring more dollars in.

Exports generate foreign exchange revenue and jobs

Exporting can be profitable to businesses of all sizes because it diversifies the customer base, grows sales faster, creates more jobs and increases wages.

A number of Postal Administrations do support their MSMEs by helping them to sell more products at home and export products, thereby promoting economic development. Caribbean Posts can do the same.

Exporta Fácil, a simplified export process where the Post Office acts as the customs intermediary for MSMEs, has now been implemented in Brazil, Colombia, Ecuador, Peru, Uruguay, Bolivia, Venezuela, Argentina, Paraguay, Chile, Honduras, Panama and the Dominican Republic. The Post certifies export compliance, collects export taxes, expedites the registration and issuance of an export declaration using a simplified form that is transmitted to customs via IT systems and ships the export item via its physical delivery network.

An analysis of Exporta Fácil by The Institute for the Integration of Latin America and the Caribbean (INTAL) concluded a clear, export-growth trend, noting that Brazil had an average annual export growth rate of +26.3% (2000 to 2013); Uruguay +24.6% (2009 to 2013), Colombia +63.3% (2010 to 2013); Ecuador +67.5% (2012 to 2013); and Peru +18.4% (2009 to 2013). The main export destinations were the United States, Europe, Chile and Hong Kong.

Posts can also promote MSMEs and act as trade intermediaries

PostNord Sverige, the Swedish postal service, operates an international storefront (through EhubNordic) for Swedish companies wanting to sell in the Asian market. The next step is Korea. This past spring (2017), Austria Post launched its online, domestic marketplace, shopping.at defined as “from Austria for Austria.” Shoppers choose from Austria Post’s list of delivery options. In the fall of 2017, the Thai Postal Service (TPS) launched the Thailand Post Mart service, a new website offering food and products sourced from all over Thailand. Royal Mail has a storefront on behalf of British businesses on Tmall Avenue51.

The Australia Post model goes even further by taking a very practical approach. Australia Post recognized that the large majority of Australia’s MSMEs faced significant challenges and Australia Post addressed those challenges in order to facilitate trade but also grow their own parcel business.

The Caribbean Development Bank, Caribbean Export and others have all pointed out the Caribbean MSMEs challenges – inadequate access to financial resources for investment and working capital, limitation in management or business skills, high cost for infrastructure support (warehousing, factory and commercial space, industrial parks, etc.), low use of technology, lack of competitiveness, difficulty in accessing business information on markets and products for exports and a lack of e-commerce capability to create a website, translate, promote and list or market products abroad.

Australia Post acts as a middleman or intermediary for the MSMEs. It brings the technology, the web skills, the contacts, the business information on markets, the knowledge of the right products for export, the marketing skills, the translation skills and the billing process. It allows Australian MSMEs worry-free selling of their products within Australia and in the growing international markets of China and South East Asia.

Australia Post’s trusted, domestic website for MSMEs, called Farmhouse Direct, gives Australian farmers and producers another way of selling their products beyond their own city, directly to the Australian population of 20 million Internet users. By comparison, the Caribbean Region has 18.5 million untapped Internet users and 11 million Facebook users.

Farmhouse Direct is a virtual market place open 24/7. It offers items under the categories of Food, House, Body, Gift, Experiences and Specials. The Post does not act as a warehouse or middleman so the MSMEs keeps complete control over managing their products, pricing and the fulfilment of their customer orders. The seller pays Australia Post a commission of the website sales.

In addition, in order to promote exports abroad via Australia Post, it has enabled MSMEs to sell their products across Alibaba’s key platforms (websites) including Tmall Global, JD Worldwide and 1688.com. Australia Post has set up storefront pages on these websites. Participating MSMEs can access more than 560 million consumers in six countries throughout South-East Asia. Australia Post also plans to open more storefront pages on other sites in Vietnam, Thailand and the Philippines.

Online shoppers in China are health-conscious and prepared to pay more for premium products. Popular product categories include health products, supplements, cosmetics, skincare products, maternity products, baby products, milk powder, organic food and wine. Other Posts have found that “personal luxury items” can also be added to this list.

Australia Post will manage all aspects of these international websites for the MSME. The MSME registers their interest. They are told if their products are a good fit for the market. The MSME signs a service agreement and provides product information and photos. Australia Post translates the product information and gets the MSME set up on the storefronts. The MSME’s Chinese / Asian customers order and pay online. Australia Post translates their order into English and sends it to the MSME who confirms receipt. The MSME ships the order using Australia Post. When Tmall Global, JD Worldwide or 1688.com pays Australia Post, it in turn pays the amount into the MSME’s bank account (less a commission).

The CSME must apply to Caribbean Posts and help them equip

The integrated development strategy outlined by the CARICOM Single Market and Economy (CSME) of “pooling forces and harmonizing operations” should also apply to the postal sector in order to provide the context for reform and technological modernization of postal services as a necessary condition for establishing a viable regional network that can effectively support MSMEs.

Without trusted and knowledgeable intermediaries, MSMEs on their own cannot participate in the large export market. They need the technology, the web skills, the contacts, the business information on markets, the right products for export, the marketing skills, the translation skills and the billing process.

This is precisely what CARICOM, Caribbean Export, the Caribbean Development Bank (CDB) and the Caribbean Postal Union can bring to the table to eliminate the gap between MSMEs and both the Caribbean and international markets.

The strong, global Caribbean Brand and many of the products produced by MSMEs have international appeal and represent a relaxed lifestyle in North America and Europe. It is a brand that has yet to be known and enjoyed in China and South East Asia. MSMEs produce products that are very exportable.

The Caribbean Development Bank’s 2016 Study, “MSME Development in the Caribbean – Towards a New Frontier”, stated that MSMEs account for the majority of private enterprises in the Caribbean and contribute more than 50% to Gross Domestic Product. The CDB proposed 40 recommendations to support MSMEs. Due to their established networks, skills and “trusted intermediary” brand, Caribbean Postal Administrations can fulfill at least 12 or 30% of those recommendations (see chart below).

According to statistics from the CARICOM Secretariat, the regional private sector creates at least 70% of jobs. According to the Jamaican Ministry of Industry, Commerce, Agriculture and Fisheries, MSMEs in Jamaica account for 90% of jobs in the economy. MSMEs also contribute to the Caribbean economy through workforce skills upgrading, innovation and technology changes.

The implementation of Exporta Fácil by every Caribbean Postal Administration as well as Caribbean-Branded domestic and international website storefronts can benefit designers of fashion; manufacturers of clothes; makers of jewellery and personal luxury items; producers of jams, jellies, chutneys, sauces; manufacturers of design or hand-made bags and purses; producers of spices; manufacturers of maternity and baby products; manufacturers of home decor and accessory items; makers of garden decorations; producers of beauty, aromatherapy, botanicals and spa items; producers of coffee, organic foods, dried organic fruits, rum cakes, honey or other specialty foods; producers of pottery, leather or wood carving goods; makers of hats; artists of paintings; artisans of wood carvings or ceramics as well as all their employees and their families.

To make it happen everyone must work together and Caribbean Posts must address the general concerns of MSMEs which may not apply to all Posts. MSMEs are concerned about the lack of fast, on-time delivery services; the reliability of postal and non-postal partners; poor responsiveness to customer inquiries; pilfered, lost or damaged items; unclear returned goods and compensation policies; lack of end-to-end track and trace visibility of their parcels; long delays in customs clearance; poor communication and support from service providers across borders and limiting legislation on postal export value and weight.

Posts will require postal technological modernization as well as cooperation from Customs in order to facilitate import clearance and export co-operation and facilitation. It is also important to have a lower-value, cross-border, lightweight packet requiring tracking and offering a reliable, global-delivery service of around a week to ten days.

Most importantly, Caribbean Postal Administrations must receive the appropriate, enabling assistance from their Governments to increase their internal capacity to promote trade for MSMEs and economic development for their countries.